Apartment vacancies fell across Colorado as rents rose during the second quarter, signaling a surprising amount of growth in demand for housing in spite of limited wage and job growth, shows a state report released on Thursday. Vacancies fell in seven of the eight metropolitan areas of the state measured by the survey, including Fort Collins, Loveland, Greeley and Colorado Springs. Only Grand Junction and Pueblo reported a rise in the vacancy rate, according to the report by the Department of Local Affairs’ Division of Housing, from the second quarter of 2009 to the second quarter of this year. The vacancy rate was the lowest since Gordon Von Stroh, a University of Denver business professor, began compiling the second-quarter, state-wide report in 2007.
Trend is landlord’s friend
Lower vacancies and higher rents appears to be a trend, even if the economy doesn’t perk up.
“A lot of it is just natural population growth,” Von Stroh said. “The state’s (rental-age) population is increasing, no matter what happens. Demand is picking up, but few new units are being added to the marketplace. It would take some pretty significant increases in rental rates to justify the cost of new construction. Given that demand is growing and the supply is not, many would come to the conclusion that we could face a pretty severe shortage of rental units down the road.”
Home ownership not for everyone
Von Stroh added that buying a home has losted some of its luster from the days prior to the housing “depression,” when subprime loans and easy credit helped fueled the first foreclosure wave.
“Everyone was encouraged to be a home-owner, and not everyone should own a home,” Von Stroh said.
Terrance Hunt, a broker with Apartment Realty Advisors, agreed.
“There has been a fundamental shift,” Hunt said. ”In the days of the subprime mortgage, the No. 1 reason people left apartments was to buy a home. Now, the pendulum is swinging back in the direction of rentals. Now, home ownership and renting are much more in balance.”
Springs boasts biggest drop
The largest drop in the vacancy rate was found in Colorado Springs where, year-over-year, the rate fell from 9.8 percent to 5.8 percent. In Grand Junction, vacancies rose year-over-year from 4.5 percent to 8.9 percent, and in Pueblo, they rose from 8.5 percent to 10.4 percent during the same period.
Much of the improvement in Colorado Springs is tied to the military, Von Stroh said. “More people are coming back from Afghanistan than leaving,” Von Stroh. “For Colorado Springs, it is very important to look at what is is happening to the multifamily market on a month-to-month basis. When you do, what happens monthly tracks very closely to troop movements.”
The metro Denver vacancy rate, measured earlier this month in a separate survey, also fell year-over-year from 9.0 percent to 6.1 percent. Vacancy rates in all metropolitan areas were Colorado Springs, 5.8 percent; Ft. Collins/Loveland, 6.8 percent; Grand Junction, 8.9 percent; Greeley, 6.3 percent; Pueblo, 10.4 percent.
Fort Collins has benefitted from a growing trend of more Colorado State University Students staying in the city during the summer, said Carrie Ann Gillis, property manager for New Colony Apartments in Fort Collins.
“They can’t find a job back home, so they decided they might as well stay,” said Gillis, a board member with the Northern Rental Housing Association. Many CSU students are seeking a second degree or are getting an advanced degree, she added, which is boosting demand for rentals.
Indeed, students who have not been thinking ahead, may find it tough to find housing for the new school year, she said. “They had to pay attention to the 7 Ps: prior planning prevent poopy performance,” she said.
Rents rising
Meanwhile, average rents rose across the state as vacancies fell. Among the state’s metropolitan areas, average rents rose in all areas except Greeley. The largest increase was found in the Fort Collins/Loveland region where the average rent increased from $825.03 to $885.29 from the second quarter of last year to the second quarter of this year. In Greeley, the average rent fell from 629.01 to 618.29, year-over-year.
Average rents in all metropolitan areas measured were Colorado Springs, $719.22, Ft. Collins/Loveland, $885.29; Grand Junction, $634.48; Greeley, $618.29; Pueblo, $541.78. The metro Denver average rent, measured in a separate survey, was $899.97 for the second quarter. Still, rents are not near high enough new justify a new wave of construction, Von Stroh said. “We’re talking about some pretty serious dollars in rent increases, before it makes sense to build,” Von Stroh said. And salaries are not rising enough to pay the additional costs, Gillis said.
